 "Exports to the United States from India have become even more challenging after President Donald Trump announced tariffs to be imposed on Indian and other exports from other countries on April 2, 2025. AP")
In 2025, global supply chains remain disrupted, shipping vessels rerouting due to security risks and renewal in trade protectionism. Nearly 15 per cent of the international maritime traffic continues to divert due to The Red Sea crisis, sending freight costs soaring by over 300 per cent on some routes.
Export restrictions have climbed 60 per cent since 2019 and new tariffs are tightening the screws further. In addition to the uncertainty caused by Trump tariffs, markets globally are bracing for potential policy changes. It means rising input costs, delivery delays, and industry inventory imbalances.
Factors affecting global supply chains
The convergence of increased tariffs, Red Sea-led disrupted shipping routes and escalating geopolitical tensions have affected economies globally causing several challenges for exporters, notably those in India.
Mid-November 2023 and March 18, 2024 saw 45 documented attacks by Houthi militants targeting commercial ships in the Red Sea and the Gulf of Aden. These assaults forced many vessels to reroute around the Cape of Good Hope, extending voyages by 10 days or more. Such rerouting increased fuel consumption, elevated operational costs and delivery times.
Indian exporters didn’t go unscathed. In August 2024, India’s merchandise exports declined 9 per cent year-over-year, dropping to $34.71 billion from $38.28 billion in August 2023. The petroleum product exports fell to $3.72 billion in November, down from $7.39 billion the same month the year before, stemming from the logistical challenges and other geopolitical tensions.
Impact Shorts
More ShortsEconomic impact of disrupted shipping routes
The longer routes led to a surge in shipping expenses. For instance, the Suez region’s shipping costs rose ~180% from late 2023 to early 2024.
Major trade route disruptions led to significant uncertainties in financial markets, affecting stock prices of transportation, retail, and manufacturing companies. For instance, Tesla and Volvo’s supply chain delays led to production halts, affecting their stock performance.
Critical shipping delays impacted energy prices. The Middle East oil and gas prices surged over 2%, reaching $75.07 per barrel, though OPEC+ delayed their output increase.
Longer shipping routes: Costs and market impact
Vessels going around the Cape of Good Hope increased fuel consumption and operational expenses globally. Moreover, this detour added ~ 6438 kilometres to voyages. Did you know Very Large Gas Carriers (VLGCs) consume around $30,000 of fuel daily. An extended journey would add to their costs significantly.
Higher expenses contributed to a surge in freight rates and prices for goods, adding to inflation. Industries relying heavily on timely deliveries such as manufacturing and retail, faced disruptions causing production delays and shortages in inventory.
Future outlook
The ongoing geopolitical tensions and resultant shipping disruptions have prompted significant shifts in global trade patterns. The first two months of 2024 saw the Suez Canal trade volume drop by 50 per cent compared to the same period the year before, while the trade volume transiting around the Cape of Good Hope rose an estimated 74 per cent, underscoring the substantial impact of security concerns on traditional maritime routes.
For Indian exporters, these trade shifts have been challenging. Rising shipping costs and delivery delays affected Exports worth at least $10 billion in FY 2024. Petroleum product exports experienced a notable decline, dropping by 37.56 per cent to $5.95 billion in August 2024, down from $9.54 billion in August 2023.
Today, businesses and policymakers are exploring alternative strategies to mitigate supply chain issues, such as diversified supply chains, investment in overland transportation infrastructure, and diplomatic maritime security solutions.
These solutions may help in the short term, but establishing stable key trade routes and reducing geopolitical risks is needed.
In the long run, global trade must become more flexible and resilient. For export-dependent India, staying competitive will require thoughtful planning, diversification, and cooperation with global partners. Managing these challenges will ensure stable economic growth despite the uncertainties ahead.
The author is Founder and MD, Equentis Wealth Advisory Services Pvt Ltd. he views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.